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FEI Company's Earnings Set a Fourth-Quarter Record

The high-performance microscopy maker ends 2015 on a high note.

After a rough third quarter, FEI Company (NASDAQ:FEIC) redeemed itself in its fourth quarter. Its report, which hit the wires after the closing bell on Tuesday, not only showed record revenue, operating margin, and earnings per share for a fourth quarter, but the company also boasted new order bookings. Those order bookings, as well as what's on the horizon for the business, set it up for a much stronger year in 2016.

FEI results: The raw numbers

Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)

Revenue

$273 million

$265 million

2.7%

Net income

$48 million

$33 million

45.5%

EPS

$1.17

$0.79

48.1%

Data source: FEI Company.

What happened with FEI this quarter?FEI reported a very solid quarter.

FEI's revenue was toward the upper end of its guidance range of $265 million to $275 million. Also, the company faced a stiff headwind from foreign currency moments, which negatively affected revenue by $16 million. On an adjusted basis, revenue would have been 8.2% higher year over year.

Earnings were also toward the upper end of a guidance range of $1.05 to $1.20 per share, due primarily to lower cost of sales.

Earnings would have been even higher if not for the closing of FEI's acquisition of DCG Systems during the quarter, which negatively affected net income by $3 million, or $0.07 per share.

Another highlight this quarter were new order bookings, which set a record at $294 million. That resulted in a book-to-bill of 1.08-to-1, which implies future revenue growth. Furthermore, these bookings grew its backlog to $592 million, which is well above its $536 million backlog at the end of 2014.

What management had to sayCEO Don Kania commented on the quarter by saying:

2015 finished on a positive note with record revenue, operating margin and earnings per share in the fourth quarter...The strong results in the quarter were driven by our Science segment, with record orders and revenue from life sciences customers.

After a sales slump last quarter due to weaker sales to large semiconductor customers, FEI's sales rebounded sharply this quarter. Kania notes that this surge was driven by its science segment, which grew revenue from $155.8 million in last year's fourth quarter to $163.0 million this quarter. That helped to offset continued softness in the company's industrial segment, which was basically flat year over year.

Looking forwardGiven its strong order bookings and backlog, FEI sees "improved organic revenue growth driving increased earnings and cash flow" in 2016. The company also expects to see an improvement in sales to the semiconductor market in the back half of this year. This is predicted to drive 3.5% to 6.5% organic revenue growth in 2016, with revenue expected to be in the range of $1.02 billion to $1.05 billion. Earnings, meanwhile, should be in a range of $3.55 to $3.70 per share, which at the midpoint represents 22.5% growth from 2015. It is, however, worth noting that the company's original guidance for 2015 was that earnings would be in the range of $3.40 to $3.70 per share, which it missed because of its weak third quarter.

Looking ahead to just the first quarter, FEI expects to see revenue and earnings decline sequentially because it is a seasonally weaker quarter. As such, FEI is guiding for revenue to be in the range of $215 million to $225 million, which would be flat to down 4% year over year. Meanwhile, earnings are expected to be in the range of $0.46 to $0.57 per share.

Author

Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries: Follow @matthewdilallo